1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Ley. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you inside from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,640 --> 00:00:27,160 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg At 5 00:00:27,160 --> 00:00:29,800 Speaker 1: Skybridge Capital. What they do is they're fund to fund. 6 00:00:29,800 --> 00:00:32,600 Speaker 1: They take money they allocated out to hedge funds, and 7 00:00:32,640 --> 00:00:36,680 Speaker 1: they have had a sporting pandemic, as have so many others. 8 00:00:36,960 --> 00:00:39,479 Speaker 1: They've made a choice now to go with familiar names 9 00:00:39,680 --> 00:00:44,120 Speaker 1: like Dahlio, like Lobe, and like Howard Marks as well. 10 00:00:44,200 --> 00:00:47,479 Speaker 1: Troy Gayski joins us the engineer from m I T 11 00:00:47,479 --> 00:00:50,559 Speaker 1: Troy Gayski, How are you and Mr Scaramuchi gonna engineer 12 00:00:50,640 --> 00:00:53,920 Speaker 1: forward with Dahlia, Lobe, Marks and the likes. What will 13 00:00:54,000 --> 00:00:58,960 Speaker 1: be different now versus the debacco of the last twelve months. Yeah, well, 14 00:01:00,000 --> 00:01:02,520 Speaker 1: don't know about twelve months, but certainly in March. But thanks, 15 00:01:02,560 --> 00:01:07,680 Speaker 1: not great but great to hear talk to you as well. John, 16 00:01:07,720 --> 00:01:10,280 Speaker 1: has been too long, but no, so look, I think 17 00:01:10,480 --> 00:01:13,480 Speaker 1: you know any process, you have to evolve, and you 18 00:01:13,560 --> 00:01:16,840 Speaker 1: have to try to use information that perhaps was the 19 00:01:16,880 --> 00:01:18,840 Speaker 1: president at the time and you know, look at the 20 00:01:19,120 --> 00:01:22,160 Speaker 1: reality is is we fully expect a recovery, and the 21 00:01:22,200 --> 00:01:25,199 Speaker 1: primary way we're going to play that is through distress credit, 22 00:01:25,319 --> 00:01:28,320 Speaker 1: both distress structure credit, whether it's rmbs or to a 23 00:01:28,440 --> 00:01:31,679 Speaker 1: much lesser extent CMBs and cellos, or whether it's through 24 00:01:31,680 --> 00:01:34,720 Speaker 1: good old fashioned distress restructuring. And you know, one of 25 00:01:34,760 --> 00:01:36,880 Speaker 1: the things that will be different is well we'll have 26 00:01:37,000 --> 00:01:40,160 Speaker 1: more exposure to larger managers that have a much more 27 00:01:40,200 --> 00:01:44,000 Speaker 1: stable capital base and much more staying power if we 28 00:01:44,080 --> 00:01:47,480 Speaker 1: do get another laid down that some people expect in 29 00:01:47,520 --> 00:01:50,200 Speaker 1: the fall. I mean, we're pretty certain the economy's bottoming 30 00:01:50,200 --> 00:01:52,840 Speaker 1: and markets have bottomed, but clearly we could be wrong. 31 00:01:53,400 --> 00:01:56,720 Speaker 1: And managers, whether it's Howard Marks or or Dan Loebe 32 00:01:56,800 --> 00:02:00,440 Speaker 1: or Josh Freeman Canyon, I mean, these are multi cycle 33 00:02:00,560 --> 00:02:03,840 Speaker 1: distress investors that have done a tremendous job. And that's 34 00:02:03,880 --> 00:02:06,520 Speaker 1: always been where you've gotten your best returns coming out 35 00:02:06,520 --> 00:02:09,560 Speaker 1: of any economic dislocation. And as you guys know, like 36 00:02:09,639 --> 00:02:11,760 Speaker 1: we always say that, you know, every cycle is different, 37 00:02:11,800 --> 00:02:14,639 Speaker 1: but every cycle is the same um and and so 38 00:02:14,800 --> 00:02:17,640 Speaker 1: you could argue that for some unknown reason, you know, 39 00:02:17,680 --> 00:02:20,240 Speaker 1: the returns and distressed won't be as attractive as they 40 00:02:20,240 --> 00:02:22,200 Speaker 1: were in the past. But if you look at the 41 00:02:22,280 --> 00:02:27,680 Speaker 1: divergence between equity markets and credit of all stripes right now, 42 00:02:28,120 --> 00:02:30,280 Speaker 1: it's as large as it's been, you know, since the 43 00:02:30,320 --> 00:02:34,400 Speaker 1: financial crisis, if not larger. So on a go forward basis, 44 00:02:34,480 --> 00:02:36,280 Speaker 1: that's where you're gonna get your best risk a jested 45 00:02:36,360 --> 00:02:39,720 Speaker 1: returns and doing it with managers that have strong hands 46 00:02:39,800 --> 00:02:43,440 Speaker 1: that can uh, you know, restructure individual companies or favor 47 00:02:43,480 --> 00:02:46,959 Speaker 1: structured credit versus corporate is the is we think the 48 00:02:47,000 --> 00:02:50,200 Speaker 1: way to go. But we'll still maintain a healthy exposure 49 00:02:50,280 --> 00:02:53,600 Speaker 1: to smaller midsized managers that are laser focused on a 50 00:02:53,639 --> 00:02:57,480 Speaker 1: few particular niche themes. Try. I understand the argument that 51 00:02:57,639 --> 00:03:00,960 Speaker 1: stocks and credit are diverging in ways really haven't been 52 00:03:01,000 --> 00:03:04,360 Speaker 1: seen historically. However, there are some real reasons for this. 53 00:03:04,440 --> 00:03:06,280 Speaker 1: I mean, when we talk about the equity advance, we're 54 00:03:06,280 --> 00:03:09,680 Speaker 1: talking about the big tech names that stand to benefit 55 00:03:09,720 --> 00:03:11,640 Speaker 1: from the current environment. When you talk about some of 56 00:03:11,639 --> 00:03:14,000 Speaker 1: these credits, what some of these credits, you're talking about 57 00:03:14,040 --> 00:03:18,240 Speaker 1: commercial mortgage backed securities, residential real estate, and big cities 58 00:03:18,240 --> 00:03:21,880 Speaker 1: that are going to be profoundly changed by this entire episode. 59 00:03:22,400 --> 00:03:24,960 Speaker 1: Isn't there some real reason for why some of these 60 00:03:25,000 --> 00:03:27,880 Speaker 1: assets are selling off, and also some reason for why 61 00:03:27,919 --> 00:03:31,840 Speaker 1: some of these equities are gaining right now. Oh yeah, No. Look, 62 00:03:31,919 --> 00:03:35,960 Speaker 1: as you know, there's the real economy, there's corporate fundamentals, 63 00:03:36,040 --> 00:03:38,480 Speaker 1: and then there's capital markets. And to your point, you know, 64 00:03:38,520 --> 00:03:41,920 Speaker 1: equity markets are becoming less and less reflective over time 65 00:03:42,400 --> 00:03:46,840 Speaker 1: of the real economy. Uh So, uh that being said, 66 00:03:47,160 --> 00:03:50,200 Speaker 1: you I don't think anyone could actually argue that the 67 00:03:50,240 --> 00:03:53,760 Speaker 1: equity rebound has been driven by improving fundamentals. For the 68 00:03:53,800 --> 00:03:57,200 Speaker 1: majority cases, particularly where multiples are the equity rebound has 69 00:03:57,240 --> 00:04:01,240 Speaker 1: been driven by massive expansion of monetary supply after suffering 70 00:04:01,280 --> 00:04:05,440 Speaker 1: a tremendous draw down. UM. Our primary focus will be 71 00:04:05,560 --> 00:04:11,080 Speaker 1: on residential UH single family credit as opposed to uh CMBs. 72 00:04:11,200 --> 00:04:13,480 Speaker 1: We will have a little bit of that exposure. We 73 00:04:13,520 --> 00:04:17,160 Speaker 1: agree with you that clearly the fundamentals in hospitality are 74 00:04:17,200 --> 00:04:21,120 Speaker 1: lodging in retail are very problematic. UM. But at the 75 00:04:21,160 --> 00:04:24,080 Speaker 1: same time, you know, multifamilies hung in there exceptionally well, 76 00:04:24,480 --> 00:04:26,120 Speaker 1: you know, a lot of the benefit of the p 77 00:04:26,120 --> 00:04:29,520 Speaker 1: p P and more importantly, enhanced unemployment has allowed has 78 00:04:29,520 --> 00:04:32,400 Speaker 1: allowed renters to continue to make their payments at a 79 00:04:32,400 --> 00:04:35,520 Speaker 1: pretty shocking rate. Now everyone expects it's going to deteriate 80 00:04:35,560 --> 00:04:38,960 Speaker 1: further in May, but so far, so good. So you know, 81 00:04:39,000 --> 00:04:41,960 Speaker 1: within commercial real estate you have to be very specific 82 00:04:42,040 --> 00:04:45,919 Speaker 1: to sector when you're doing your forward analysis UM. And 83 00:04:46,040 --> 00:04:48,839 Speaker 1: in terms of residential housing, look, I mean, you know, 84 00:04:48,920 --> 00:04:52,440 Speaker 1: coming into this, we had the best most pristine mortgage 85 00:04:52,480 --> 00:04:55,080 Speaker 1: credit in at least a generation in terms of debt 86 00:04:55,080 --> 00:04:58,599 Speaker 1: to GDP or debt to income UM if you looked 87 00:04:58,640 --> 00:05:02,680 Speaker 1: at mortgage servicing costs, and so obviously there's been deterioration 88 00:05:02,800 --> 00:05:07,039 Speaker 1: forbearance requests have gone up substantially UM in the markets, 89 00:05:07,080 --> 00:05:09,920 Speaker 1: pricing in about a fifteen percent total forbearance requests with 90 00:05:10,000 --> 00:05:13,839 Speaker 1: somewhere between two and five percent ultimate foreclosures UM. But 91 00:05:13,960 --> 00:05:16,920 Speaker 1: as the economy recovers, we may end up with much 92 00:05:17,040 --> 00:05:22,039 Speaker 1: less home price declines than were initially expected, particularly given 93 00:05:22,440 --> 00:05:24,719 Speaker 1: you know, again when you think through the ramifications of 94 00:05:25,440 --> 00:05:28,440 Speaker 1: ultra loose or hyper loose monetary policy, you know, the 95 00:05:29,240 --> 00:05:33,080 Speaker 1: likelihood of a material loss of property value and residential 96 00:05:33,120 --> 00:05:35,839 Speaker 1: housing is fair fairly low. I mean, we're modeling out 97 00:05:35,839 --> 00:05:38,120 Speaker 1: down ten percent, but there are many forecasters I think 98 00:05:38,120 --> 00:05:40,159 Speaker 1: it's going to be closer to flat or only down five. 99 00:05:40,760 --> 00:05:43,039 Speaker 1: And when you have LTVs that are as low as 100 00:05:43,120 --> 00:05:45,919 Speaker 1: they were coming into this um, even in the event 101 00:05:45,960 --> 00:05:50,880 Speaker 1: of a foreclosure, which would happen you know, say two, 102 00:05:51,240 --> 00:05:53,960 Speaker 1: your recovery value much higher. So you know, when when 103 00:05:53,960 --> 00:05:56,400 Speaker 1: we think through uh, you know, let's call it non 104 00:05:56,480 --> 00:06:00,200 Speaker 1: vanilla structured credit or non vanilla credit. Residential how Z 105 00:06:00,400 --> 00:06:03,120 Speaker 1: is clearly going to be a big winner as well 106 00:06:03,279 --> 00:06:06,039 Speaker 1: multi family commercial real estate. We think those sectors have 107 00:06:06,080 --> 00:06:08,680 Speaker 1: the most upside by far. And then you know, back 108 00:06:08,680 --> 00:06:11,480 Speaker 1: to the conversation with regard to Lobe or a Mars 109 00:06:11,600 --> 00:06:15,080 Speaker 1: or a or a Josh Freeman, I mean they're they're 110 00:06:15,200 --> 00:06:17,640 Speaker 1: also very focused on corporate credit, right and when you 111 00:06:17,680 --> 00:06:21,160 Speaker 1: think of the four team percent for twelve month of 112 00:06:21,200 --> 00:06:22,800 Speaker 1: fault rates is going to be in high yield? Do 113 00:06:22,839 --> 00:06:24,680 Speaker 1: you think of these seven or eight percent it's going 114 00:06:24,760 --> 00:06:27,760 Speaker 1: to be present in levered loans. You know, that's going 115 00:06:27,800 --> 00:06:31,400 Speaker 1: to provide them ample supply to do good old fashioned 116 00:06:31,400 --> 00:06:34,000 Speaker 1: distress restructurings. Which again, if you look at the last 117 00:06:34,000 --> 00:06:37,240 Speaker 1: two cycles or even the H. W. Bush recession, um 118 00:06:37,480 --> 00:06:41,240 Speaker 1: that that was the most profitable hedge fund strategy by far. 119 00:06:42,080 --> 00:06:43,520 Speaker 1: So I think a lot of people will be sitting 120 00:06:43,520 --> 00:06:45,359 Speaker 1: here thinking why do you want to pay a hedge 121 00:06:45,360 --> 00:06:48,560 Speaker 1: fund so that when the photo reserves stepped in and 122 00:06:48,600 --> 00:06:51,680 Speaker 1: the distressed opportunities aren't anything like they were after all 123 00:06:51,880 --> 00:06:57,840 Speaker 1: oh nine. Well, look, I mean, I don't know which 124 00:06:57,880 --> 00:07:01,640 Speaker 1: analysis one would suspect or suggest isn't as great as 125 00:07:01,920 --> 00:07:04,760 Speaker 1: at the end of eight or O nine. Admittedly there 126 00:07:04,960 --> 00:07:09,080 Speaker 1: there won't be the same returns to high yield or 127 00:07:09,200 --> 00:07:13,200 Speaker 1: distressed as you did post immediately after the Lehman failure 128 00:07:13,200 --> 00:07:16,040 Speaker 1: when spreads hit their wides, but spreads it tighten in 129 00:07:16,120 --> 00:07:18,400 Speaker 1: quite substantially prior to O nine, and you still have 130 00:07:18,520 --> 00:07:22,320 Speaker 1: spectacular returns UM. And then back to your direct point. Look, 131 00:07:22,360 --> 00:07:27,080 Speaker 1: the if you think of um where high yield is today? Right, 132 00:07:27,120 --> 00:07:29,960 Speaker 1: So say you're an investor and you want to buy credit, Well, 133 00:07:30,080 --> 00:07:31,920 Speaker 1: you're more than likely going to buy it through high yield. 134 00:07:32,560 --> 00:07:35,280 Speaker 1: You're you're in an eight percent effective yield, which to 135 00:07:35,320 --> 00:07:37,880 Speaker 1: your point is much tighter than it was coming into 136 00:07:37,880 --> 00:07:41,920 Speaker 1: oh nine. Um, your your law suggested yield is basically 137 00:07:41,960 --> 00:07:44,800 Speaker 1: minus two the next twelve months when you adjust for defaults. 138 00:07:45,360 --> 00:07:49,000 Speaker 1: So the better opportunity is going to be in the 139 00:07:49,040 --> 00:07:51,480 Speaker 1: companies that get kicked out of the ETFs or get 140 00:07:51,480 --> 00:07:54,960 Speaker 1: downgraded out of the indices that have to go through restructurings. 141 00:07:55,240 --> 00:07:58,120 Speaker 1: As long as you're careful and avoid too much energy exposure, 142 00:07:58,480 --> 00:08:00,920 Speaker 1: you know, that's where you'll have the high teens or 143 00:08:00,960 --> 00:08:03,560 Speaker 1: low twenty type returns. Whereas to your point, if you're 144 00:08:03,560 --> 00:08:07,040 Speaker 1: just sticking to liquid vanilla on the un ETFs, it's 145 00:08:07,080 --> 00:08:09,040 Speaker 1: being much harder to put up a tract of returns 146 00:08:09,040 --> 00:08:11,320 Speaker 1: the next several years. Truck, I ask you, thank you 147 00:08:11,440 --> 00:08:19,560 Speaker 1: so much. Thanks Skybridge Capital, greatly appreciated. There's a math 148 00:08:19,600 --> 00:08:22,200 Speaker 1: to it in the heritage of Society General and their 149 00:08:22,240 --> 00:08:26,240 Speaker 1: derivatives effort, their math centric effort as well, and of 150 00:08:26,280 --> 00:08:29,720 Speaker 1: course that's scene in their rate strategy with Sobrado Rajapa 151 00:08:29,800 --> 00:08:32,240 Speaker 1: who joins us right now, Sobrad, I'm gonna cut to 152 00:08:32,240 --> 00:08:34,640 Speaker 1: the chase on a Friday, John can ask all the 153 00:08:34,679 --> 00:08:38,400 Speaker 1: fancy questions with Lisa. The real yield, phenominal yield, John 154 00:08:38,440 --> 00:08:41,160 Speaker 1: is a real yield coming back. I don't know. Hopefully, 155 00:08:42,280 --> 00:08:45,160 Speaker 1: careful negotiations, if we get things back together, hopefully we 156 00:08:45,200 --> 00:08:48,360 Speaker 1: can bring it back. Saying broad, I get distracted. I 157 00:08:48,400 --> 00:08:51,000 Speaker 1: want you to give me the levels. I'm ten year 158 00:08:51,200 --> 00:08:54,760 Speaker 1: in thirty year where you really break into a sweat. 159 00:08:54,840 --> 00:08:58,240 Speaker 1: Where's the ten year level that matters? Lower yield, where's 160 00:08:58,280 --> 00:09:02,160 Speaker 1: the thirty year bond yield, lower yield, where things really 161 00:09:02,200 --> 00:09:07,600 Speaker 1: fall apart um, I'd be concerned, especially in the tenure, 162 00:09:07,679 --> 00:09:10,679 Speaker 1: if we break through forty basis points. I feel like that, 163 00:09:10,880 --> 00:09:14,520 Speaker 1: to me is a low that we've seen that's far 164 00:09:14,760 --> 00:09:18,080 Speaker 1: during the crisis that I think the market can manage. 165 00:09:18,600 --> 00:09:21,920 Speaker 1: But I think anything below that the market there definitely 166 00:09:21,960 --> 00:09:25,360 Speaker 1: be a little bit of a concern over how bad 167 00:09:25,400 --> 00:09:28,199 Speaker 1: this can get, and that you know, that would be um, 168 00:09:28,240 --> 00:09:31,560 Speaker 1: you know, a new paradigm shifting mappin in because what 169 00:09:31,760 --> 00:09:35,600 Speaker 1: I think currently the markets pricing in is exactly what 170 00:09:36,000 --> 00:09:39,559 Speaker 1: set share pouse that which is a range of possible outcomes. 171 00:09:40,000 --> 00:09:44,400 Speaker 1: I would say that's broader disagreement on virtually every topic 172 00:09:45,040 --> 00:09:48,400 Speaker 1: of discussion, whether it be the direction of rates, inflation, 173 00:09:49,120 --> 00:09:51,920 Speaker 1: inflation expectations, and now you're starting to see that even 174 00:09:52,000 --> 00:09:55,560 Speaker 1: the equity market, there's very little agreement on the future 175 00:09:55,600 --> 00:09:59,439 Speaker 1: direction of how things are headed. So I would argue 176 00:09:59,440 --> 00:10:01,840 Speaker 1: that the of the markets are basically pricing in a 177 00:10:01,960 --> 00:10:04,600 Speaker 1: range of possible outcomes, and you're seeing that born out 178 00:10:05,200 --> 00:10:07,400 Speaker 1: in some of the pricing we're seeing in the bond 179 00:10:07,440 --> 00:10:10,480 Speaker 1: market sobadre You could take a look at the low 180 00:10:10,559 --> 00:10:13,040 Speaker 1: yields and say this is negative, it's a commentary on 181 00:10:13,200 --> 00:10:16,320 Speaker 1: low expected inflation. You could also say it's a positive 182 00:10:16,320 --> 00:10:18,640 Speaker 1: because the US has to buy a borrow a lot 183 00:10:18,720 --> 00:10:20,920 Speaker 1: a lot of money and they're doing it at record 184 00:10:20,960 --> 00:10:24,400 Speaker 1: low costs. Next week twenty year bond issue is the 185 00:10:24,440 --> 00:10:27,480 Speaker 1: first one since the nineteen eighties, is expected to come 186 00:10:27,480 --> 00:10:30,640 Speaker 1: with a yield of one point zero nine percent. Why 187 00:10:30,640 --> 00:10:32,439 Speaker 1: aren't we seeing a fifty year or a hundred year 188 00:10:32,480 --> 00:10:37,040 Speaker 1: issuance from the US. Well, because there's really no natural 189 00:10:37,200 --> 00:10:40,280 Speaker 1: buyer or fifty hundred year bonds in the US. I 190 00:10:40,320 --> 00:10:44,400 Speaker 1: mean the alan community or the asset liability managers in 191 00:10:44,480 --> 00:10:48,160 Speaker 1: the US like pensions and insurance companies typically don't want 192 00:10:48,200 --> 00:10:52,959 Speaker 1: to buy very very long duration bonds. So really it's 193 00:10:53,040 --> 00:10:55,839 Speaker 1: it's a question of where the demand's going to come from, 194 00:10:56,120 --> 00:10:59,640 Speaker 1: and from the studies that the Treasury has done um 195 00:10:59,679 --> 00:11:04,320 Speaker 1: as well as the the Advisory Committee. Really the sweet 196 00:11:04,320 --> 00:11:08,040 Speaker 1: spart for issuing more is in the twenty years factor, 197 00:11:08,160 --> 00:11:12,040 Speaker 1: because that's really where insurance companies can step in and 198 00:11:12,040 --> 00:11:16,280 Speaker 1: and take down some of the supply. Speaking of taking 199 00:11:16,280 --> 00:11:18,880 Speaker 1: down the supply SEVTRA, how much of this supply will 200 00:11:18,880 --> 00:11:24,600 Speaker 1: the FETE be buying? Um. The set typically doesn't buy 201 00:11:25,240 --> 00:11:27,679 Speaker 1: on their own issues, but they have been sort of 202 00:11:28,480 --> 00:11:31,160 Speaker 1: buying at a piece of VOT, say anywhere between seventy 203 00:11:31,200 --> 00:11:34,440 Speaker 1: ten billion on average for the last couple of I 204 00:11:34,559 --> 00:11:37,480 Speaker 1: just mean in terms of scize evat, not of course, 205 00:11:37,520 --> 00:11:39,480 Speaker 1: not participating in the primary market. I just mean in 206 00:11:39,559 --> 00:11:42,760 Speaker 1: terms of size. Once they start buying these treasuries, in 207 00:11:42,880 --> 00:11:45,520 Speaker 1: terms of the supply versus how much the feed will 208 00:11:45,559 --> 00:11:48,199 Speaker 1: be buying, will they be buying more than than is 209 00:11:48,240 --> 00:11:52,320 Speaker 1: actually supplied by the treasury um. That's a very good 210 00:11:52,400 --> 00:11:55,839 Speaker 1: question because it's you know, the set has been extraordinarily 211 00:11:55,880 --> 00:11:58,800 Speaker 1: careful and not sort of showing its card. They have 212 00:11:58,960 --> 00:12:02,880 Speaker 1: not told us or pre announced the the size of 213 00:12:02,920 --> 00:12:05,680 Speaker 1: the asset purchases and for how long they're going to 214 00:12:05,720 --> 00:12:08,400 Speaker 1: continue to purchase. I think the broad consensus is that 215 00:12:08,960 --> 00:12:12,120 Speaker 1: if asset purchases were intended to provide the quidity, they've 216 00:12:12,120 --> 00:12:15,720 Speaker 1: already accomplished that. So maybe they're continuing to sort of 217 00:12:15,760 --> 00:12:18,200 Speaker 1: have skin in the game to keep interest rates low 218 00:12:18,880 --> 00:12:21,200 Speaker 1: so that you don't see a pop and yields with 219 00:12:21,440 --> 00:12:24,080 Speaker 1: the uh, you know, they're you just to buy your 220 00:12:24,200 --> 00:12:28,079 Speaker 1: name hit the markets, brot. I got like four questions here, 221 00:12:28,080 --> 00:12:30,280 Speaker 1: but I'm gonna go right to where you were. I 222 00:12:30,320 --> 00:12:35,640 Speaker 1: still don't understand how a central bank effects yield curve control, 223 00:12:36,160 --> 00:12:38,240 Speaker 1: which is what you're talking about. They're showing they're not 224 00:12:38,360 --> 00:12:41,720 Speaker 1: they're hiding their cards because they're trying to control movements. 225 00:12:41,760 --> 00:12:44,959 Speaker 1: I get that maybe that's a precursor to yield curve control. 226 00:12:45,240 --> 00:12:48,480 Speaker 1: Do you have confidence at sock Chin that any central 227 00:12:48,480 --> 00:12:53,680 Speaker 1: bank and quote unquote control the yield curve? Well, I 228 00:12:53,679 --> 00:12:57,160 Speaker 1: think some of the you know, I mean the US 229 00:12:57,240 --> 00:13:01,760 Speaker 1: for instance, or Japan or even Europe. I think that 230 00:13:01,920 --> 00:13:05,360 Speaker 1: you know, you have the luxury of being a reserve currency, 231 00:13:05,559 --> 00:13:08,199 Speaker 1: and you know, people are always going to flock to 232 00:13:09,080 --> 00:13:11,920 Speaker 1: safe haven assets, and there's a lot of credibility for 233 00:13:12,040 --> 00:13:15,439 Speaker 1: these these large governments and in central banks. So I 234 00:13:15,520 --> 00:13:19,160 Speaker 1: think for these countries, you know, there's the FED policy 235 00:13:19,200 --> 00:13:21,800 Speaker 1: and FED actions, We're going to keep a lid on 236 00:13:22,040 --> 00:13:25,600 Speaker 1: treasury or it really depends on you know, the credit 237 00:13:25,600 --> 00:13:27,800 Speaker 1: worthiness of the country, and that's really where you tend 238 00:13:27,800 --> 00:13:30,959 Speaker 1: to see yields move high. I just don't think that's 239 00:13:30,960 --> 00:13:35,000 Speaker 1: going to happen in the US, Savadra Rajapa of Society General. 240 00:13:35,080 --> 00:13:37,040 Speaker 1: You've nailed it again and again when it comes to 241 00:13:37,120 --> 00:13:40,360 Speaker 1: expecting guilds to go lower before the pandemic, when a 242 00:13:40,360 --> 00:13:43,200 Speaker 1: lot of people expected them to start heading higher. I 243 00:13:43,240 --> 00:13:45,800 Speaker 1: want to ask you about the political ramifications for the 244 00:13:45,800 --> 00:13:48,679 Speaker 1: Federal Reserve as it essentially monetizes the debt of the 245 00:13:48,760 --> 00:13:52,240 Speaker 1: United States. As the former chief economist of PIMCO said, 246 00:13:52,440 --> 00:13:54,839 Speaker 1: we've had a merger of monetary and fiscal policy. We've 247 00:13:54,880 --> 00:13:58,280 Speaker 1: broken down the church and state separation between the two. 248 00:13:58,840 --> 00:14:03,360 Speaker 1: How consequential is that a you know, it's it's it's 249 00:14:03,480 --> 00:14:07,560 Speaker 1: quite consequential, and it's meaningful at the current time, UM 250 00:14:07,600 --> 00:14:11,200 Speaker 1: that the Fed is intervening because you know, we've had, 251 00:14:11,400 --> 00:14:14,679 Speaker 1: as you know, a very unprecedented rise and deficits in 252 00:14:14,760 --> 00:14:17,200 Speaker 1: a very short period of time. You know, three point 253 00:14:17,280 --> 00:14:21,280 Speaker 1: four trillion for physically or twenty and you know two 254 00:14:21,360 --> 00:14:25,680 Speaker 1: trillion plus for fiscal or and this is just as 255 00:14:25,720 --> 00:14:28,920 Speaker 1: of now. We're not accommodating new plans that are put 256 00:14:29,000 --> 00:14:32,680 Speaker 1: forth by UM the House. And you know, I mean 257 00:14:32,760 --> 00:14:35,240 Speaker 1: to the odds of that passing are probably low, but 258 00:14:36,320 --> 00:14:39,080 Speaker 1: definit gro only rise from here, not you know, go 259 00:14:39,200 --> 00:14:42,280 Speaker 1: lower over the next couple of years. So in that context, 260 00:14:42,400 --> 00:14:46,440 Speaker 1: you know, FED support is extraordinarily welcome. But I think, 261 00:14:46,880 --> 00:14:48,520 Speaker 1: you know, we're going to look back at this and 262 00:14:48,720 --> 00:14:51,240 Speaker 1: and pass judgment. But in my opinion, I feel like 263 00:14:51,280 --> 00:14:53,760 Speaker 1: the FETs doing the right thing to support the broader economy. 264 00:14:55,320 --> 00:14:56,680 Speaker 1: I think a lot of people feel the same. Wise 265 00:14:56,760 --> 00:14:58,800 Speaker 1: a better of course, you'll always get people criticizing the 266 00:14:58,800 --> 00:15:01,160 Speaker 1: FEED and often on that side of things. But yeah, 267 00:15:01,240 --> 00:15:03,280 Speaker 1: I think they've done a brilliant job stepping in and 268 00:15:03,320 --> 00:15:06,520 Speaker 1: really alleviating some of the financial pain on the financial 269 00:15:06,560 --> 00:15:08,320 Speaker 1: condition side. Just to wrap things up and build on 270 00:15:08,320 --> 00:15:10,840 Speaker 1: what Tom said, the Bank Japan did a brilliant job 271 00:15:11,200 --> 00:15:13,920 Speaker 1: of capin a tenure yield in Japan, and they don't 272 00:15:13,960 --> 00:15:16,520 Speaker 1: really need to participate much in the bond market now 273 00:15:16,720 --> 00:15:19,040 Speaker 1: to do it. When you think of yield curve control, 274 00:15:19,160 --> 00:15:21,360 Speaker 1: is that what you're thinking could happen in the United 275 00:15:21,400 --> 00:15:25,520 Speaker 1: States what we've seen play out in Japan. Absolutely, I 276 00:15:25,520 --> 00:15:29,600 Speaker 1: think that that's really the the the the important feature. 277 00:15:29,640 --> 00:15:32,840 Speaker 1: It says, what I desire out of yota control is 278 00:15:32,880 --> 00:15:36,720 Speaker 1: that you know, the communication channel works just as effectively, 279 00:15:36,720 --> 00:15:40,040 Speaker 1: so the seed doesn't have to uh, you know, continue 280 00:15:40,040 --> 00:15:42,880 Speaker 1: to buy assets and and and blow up its balance sheet. 281 00:15:43,280 --> 00:15:46,920 Speaker 1: I mean, as we all know, during the post crisis period, 282 00:15:46,960 --> 00:15:50,360 Speaker 1: it took the FED a long time, over ten years 283 00:15:50,480 --> 00:15:53,160 Speaker 1: before it could start thinking about unwinding its balance sheet. 284 00:15:53,200 --> 00:15:56,800 Speaker 1: If anything, it started raising rates before it started unwinding 285 00:15:56,840 --> 00:15:59,800 Speaker 1: it's it's balancy. This was a debate earlier on on 286 00:16:00,040 --> 00:16:02,000 Speaker 1: what they should do. First, they shouldn't mind the balance. 287 00:16:02,040 --> 00:16:03,960 Speaker 1: She did then raise rates, but then they landed up 288 00:16:04,200 --> 00:16:09,040 Speaker 1: raising rates and then gradually unminding its bound. She is 289 00:16:09,080 --> 00:16:11,000 Speaker 1: the balance. She gets to be too large, and the 290 00:16:11,040 --> 00:16:14,240 Speaker 1: aspiration of ever bringing it back down is going to 291 00:16:14,880 --> 00:16:17,640 Speaker 1: is going to fail. So I think the yield curve 292 00:16:17,720 --> 00:16:20,280 Speaker 1: control from that perspective is a great tool because the 293 00:16:20,280 --> 00:16:25,600 Speaker 1: communication channel tends to work just as effectively as as 294 00:16:25,680 --> 00:16:30,000 Speaker 1: the as as actually going out and purchasing uh, you know, 295 00:16:30,360 --> 00:16:34,520 Speaker 1: treasuries to keep yields low. So um, I think that 296 00:16:34,520 --> 00:16:38,080 Speaker 1: that's when you know, once they've done exhausting uh, once 297 00:16:38,120 --> 00:16:41,080 Speaker 1: they've done bump purchasing as much as they can, I 298 00:16:41,120 --> 00:16:44,520 Speaker 1: think that they will they will try to employ yield 299 00:16:44,520 --> 00:16:48,520 Speaker 1: curve control subaal fantastic to catch up with you this morning, 300 00:16:48,680 --> 00:16:50,120 Speaker 1: My best to you and yours er the whole of 301 00:16:50,120 --> 00:16:52,440 Speaker 1: the same as sok Gen sabatras Jampa there the head 302 00:16:52,440 --> 00:17:00,920 Speaker 1: of US Right Strategy sat as General Andrew holln Holst 303 00:17:01,040 --> 00:17:02,920 Speaker 1: a city joining us now place to site to get 304 00:17:02,920 --> 00:17:05,280 Speaker 1: the lightest on his perspective, and they have few out 305 00:17:05,280 --> 00:17:07,440 Speaker 1: for a city group. Andrew, your first take off the 306 00:17:07,440 --> 00:17:10,679 Speaker 1: back of this dice of place. Yeah, wow, this is 307 00:17:10,720 --> 00:17:14,520 Speaker 1: just more evidence of how deep this contraction is in 308 00:17:14,640 --> 00:17:17,919 Speaker 1: April in particular and in Q two overall. You know, 309 00:17:17,960 --> 00:17:20,720 Speaker 1: I think really what we're thinking about now is not 310 00:17:20,800 --> 00:17:22,719 Speaker 1: so much the April data where we knew we were 311 00:17:22,720 --> 00:17:25,199 Speaker 1: going to see these big contractions. And yeah, I've been 312 00:17:25,200 --> 00:17:27,679 Speaker 1: looking at this number of anything even bigger than what 313 00:17:27,760 --> 00:17:30,520 Speaker 1: has been forecast. Um. But the question that is where 314 00:17:30,560 --> 00:17:33,160 Speaker 1: do we go from here? Um? Can we rebound off 315 00:17:33,200 --> 00:17:36,240 Speaker 1: of the very very negative numbers that we're seeing for 316 00:17:36,320 --> 00:17:39,000 Speaker 1: April and for Q two? Andrew, I was so shocked 317 00:17:39,000 --> 00:17:41,119 Speaker 1: I forgot to bring in, and John saved me and 318 00:17:41,160 --> 00:17:43,879 Speaker 1: brought you in because I'm looking at these numbers and 319 00:17:43,920 --> 00:17:47,800 Speaker 1: they're absolutely shocking. From where you sit with Katherine Mander. 320 00:17:47,840 --> 00:17:54,200 Speaker 1: They change the political debate in Washington Yeah, it's so interesting. Right. 321 00:17:54,240 --> 00:17:57,400 Speaker 1: We have a large fiscal package that's being debated right now, 322 00:17:57,440 --> 00:18:00,560 Speaker 1: and I think the numbers do matter. I think the 323 00:18:00,640 --> 00:18:04,000 Speaker 1: activity numbers matter. I think the jobless numbers matter a 324 00:18:04,080 --> 00:18:08,440 Speaker 1: lot as we're thinking about unemployment insurance and what we're 325 00:18:08,480 --> 00:18:11,760 Speaker 1: doing to top of incomes which are obviously being very 326 00:18:11,880 --> 00:18:14,920 Speaker 1: very deeply impacted by this. So that the debate is 327 00:18:14,960 --> 00:18:17,000 Speaker 1: probably going to continue to play out over over weeks, 328 00:18:17,040 --> 00:18:19,680 Speaker 1: but certainly the I can data place into that, Lisa, 329 00:18:19,720 --> 00:18:21,840 Speaker 1: I just got the control group in Folks. This is 330 00:18:21,880 --> 00:18:24,240 Speaker 1: the number. I look at the retail sales Folks is 331 00:18:24,280 --> 00:18:27,680 Speaker 1: like jobs claims. Tons of data comes out. The control 332 00:18:27,760 --> 00:18:32,560 Speaker 1: group is taking out the goofy stuff, gasoline, building materials, 333 00:18:33,040 --> 00:18:37,400 Speaker 1: um all sorts of different things, spam. It takes out spama. Yes, 334 00:18:37,480 --> 00:18:41,200 Speaker 1: the retail control group. We went from minus two percent, Lisa, 335 00:18:41,800 --> 00:18:46,040 Speaker 1: to a survey minus five and we clocked in with 336 00:18:46,119 --> 00:18:50,480 Speaker 1: a minus fifteen percent. That says it all. It's brutal, 337 00:18:50,920 --> 00:18:53,440 Speaker 1: it's depressing, and I gotta say, if any del Judas 338 00:18:53,600 --> 00:18:55,560 Speaker 1: every time he gives one of these data reads, you 339 00:18:55,640 --> 00:18:59,600 Speaker 1: can feel the weight of these numbers on his voice. Andrew, 340 00:18:59,720 --> 00:19:02,000 Speaker 1: a lot of people saying, we will get a big 341 00:19:02,040 --> 00:19:04,600 Speaker 1: recovery when people can go out and spend. And yet, 342 00:19:04,640 --> 00:19:07,720 Speaker 1: as we saw from the Chinese data overnight, it's not 343 00:19:07,800 --> 00:19:11,639 Speaker 1: that simple. People aren't that willing to go to restaurants 344 00:19:11,640 --> 00:19:14,720 Speaker 1: how quickly. As John was saying, how quickly can we 345 00:19:14,760 --> 00:19:19,480 Speaker 1: rebound based on what we are seeing in China, Yeah, 346 00:19:19,480 --> 00:19:22,920 Speaker 1: I think it's definitely not that simple for categories like restaurants, 347 00:19:22,960 --> 00:19:25,560 Speaker 1: for categories like travel, and it's not that simple for 348 00:19:25,600 --> 00:19:29,280 Speaker 1: the economy overall. I think we are seeing some positive 349 00:19:29,320 --> 00:19:31,320 Speaker 1: signs in the US now. We're watching a lot of 350 00:19:31,440 --> 00:19:34,320 Speaker 1: high frequency data that we don't usually watch daily data 351 00:19:34,320 --> 00:19:36,960 Speaker 1: on things like gasoline demand, on things like driving their 352 00:19:37,000 --> 00:19:41,439 Speaker 1: people driving their cars, um what we're hearing from auto 353 00:19:41,440 --> 00:19:44,680 Speaker 1: dealerships or that are reopening as they're seeing a similar 354 00:19:44,720 --> 00:19:47,879 Speaker 1: amount of demand to what they saw before the COVID 355 00:19:48,000 --> 00:19:51,719 Speaker 1: nineteen downturn. So I mean, very very early days on this, 356 00:19:51,800 --> 00:19:55,040 Speaker 1: but I think they'll do this this very differential effect 357 00:19:55,119 --> 00:19:58,280 Speaker 1: where you'll see some industry some sectors that come back quickly, 358 00:19:58,280 --> 00:20:01,520 Speaker 1: and other travel staurans are good examples where that could 359 00:20:01,560 --> 00:20:03,960 Speaker 1: be a much longer story. Andrew, there was a story 360 00:20:04,040 --> 00:20:06,840 Speaker 1: in the Wall Street Journal this morning, the headline coronavirus 361 00:20:06,960 --> 00:20:10,359 Speaker 1: finishes the retail reckoning that Amazon started, and talked about 362 00:20:10,600 --> 00:20:14,240 Speaker 1: the expectation for about a hundred thousand stores to close 363 00:20:14,320 --> 00:20:17,520 Speaker 1: over the next five years, bankruptcies to surge among brick 364 00:20:17,600 --> 00:20:21,840 Speaker 1: and mortar retailers. How much does this accelerate that trend? Yeah, 365 00:20:21,880 --> 00:20:24,119 Speaker 1: I think we'll see a big acceleration of that. That. 366 00:20:24,240 --> 00:20:27,680 Speaker 1: That was one of our initial thoughts when stores started closing, 367 00:20:27,800 --> 00:20:30,600 Speaker 1: is I think we all knew, we all expected that 368 00:20:30,640 --> 00:20:33,640 Speaker 1: there would be further brick and mortar closing of stores 369 00:20:33,960 --> 00:20:36,880 Speaker 1: in coming months and coming years. Now that you were 370 00:20:37,040 --> 00:20:39,360 Speaker 1: forced to close down, there's just gonna be a lot 371 00:20:39,400 --> 00:20:41,520 Speaker 1: of store owners to say it doesn't make sense to 372 00:20:41,600 --> 00:20:44,440 Speaker 1: reopen again. So we've seen the shift online, we've seen 373 00:20:44,640 --> 00:20:47,760 Speaker 1: shift away from brick and mortar. Definitely accelerate that substantially. 374 00:20:47,880 --> 00:20:49,840 Speaker 1: I mean, Tom, we've been talking about this for years. 375 00:20:49,920 --> 00:20:52,399 Speaker 1: This is what we've been seeing on the avenues of 376 00:20:52,520 --> 00:20:55,400 Speaker 1: New York City. In Manhattan, if you go high enough 377 00:20:55,440 --> 00:20:57,960 Speaker 1: up on Lexington, in fact, if you come down towards Midtown, 378 00:20:58,040 --> 00:21:01,760 Speaker 1: we've seen shut store fronts for long time. I totally agree, 379 00:21:01,840 --> 00:21:05,359 Speaker 1: But Andrew, what's so importantly, here is when the facts change. 380 00:21:05,480 --> 00:21:09,600 Speaker 1: Politicians change. At eight thirty this morning, six minutes ago, 381 00:21:09,720 --> 00:21:15,639 Speaker 1: did the facts just change for our August politicians? Again, 382 00:21:15,840 --> 00:21:18,880 Speaker 1: I think it's probably more the labor market that's going 383 00:21:18,920 --> 00:21:21,560 Speaker 1: to matter. And in some ways that's that's that's a 384 00:21:21,720 --> 00:21:23,840 Speaker 1: good way of looking at it, because you really want 385 00:21:23,880 --> 00:21:26,240 Speaker 1: to think about what is the negative impact that this 386 00:21:26,600 --> 00:21:28,560 Speaker 1: is having on individuals? And we know that it's huge. 387 00:21:28,600 --> 00:21:30,720 Speaker 1: We know it's huge from the jobless claims data, we 388 00:21:30,760 --> 00:21:32,560 Speaker 1: know it's huge from the jobs reports that have come 389 00:21:32,560 --> 00:21:35,280 Speaker 1: out already. So um so again, I think the economic 390 00:21:35,320 --> 00:21:39,840 Speaker 1: data matter. Does you know one retail sales reading change significantly? 391 00:21:39,840 --> 00:21:42,400 Speaker 1: The political calculus, I'm not sure we can make that stapent. 392 00:21:42,640 --> 00:21:44,679 Speaker 1: The two things that I think market participants are going 393 00:21:44,720 --> 00:21:46,600 Speaker 1: to really have to grapple within the months to come. 394 00:21:46,840 --> 00:21:49,920 Speaker 1: Andrew quite clearly, quite clearly, will get some sequential month 395 00:21:49,960 --> 00:21:52,560 Speaker 1: on month improvement as we work our way through summer. 396 00:21:52,680 --> 00:21:56,560 Speaker 1: That's clear to everybody. How do you establish the limit 397 00:21:56,720 --> 00:21:59,600 Speaker 1: to that sequential month a month improvement, the limits of 398 00:21:59,600 --> 00:22:02,920 Speaker 1: the over will recovery, the limits of normalizing. How do 399 00:22:02,960 --> 00:22:06,320 Speaker 1: you get your hands around that? Yeah, I think that's 400 00:22:06,359 --> 00:22:08,400 Speaker 1: what we really need to be watching day by day 401 00:22:08,440 --> 00:22:10,719 Speaker 1: and week to week. So so some of this is 402 00:22:11,320 --> 00:22:16,680 Speaker 1: related to how different policies ease, how quickly some activity 403 00:22:16,760 --> 00:22:18,439 Speaker 1: is allowed to return to normal. And I think what 404 00:22:18,440 --> 00:22:20,240 Speaker 1: we're thinking about more and again in the context of 405 00:22:20,240 --> 00:22:24,679 Speaker 1: the Chinese data, for instance, is how quickly do behaviors 406 00:22:24,840 --> 00:22:28,080 Speaker 1: change or not change, And so that's again it's gonna 407 00:22:28,080 --> 00:22:30,640 Speaker 1: be very different for different sectors. And I can see 408 00:22:30,680 --> 00:22:32,840 Speaker 1: things like auto demand is a good example. We could 409 00:22:32,840 --> 00:22:36,120 Speaker 1: actually have increased auto demand because maybe more people want 410 00:22:36,119 --> 00:22:39,600 Speaker 1: to be driving their cars instead of using public transport. 411 00:22:40,040 --> 00:22:41,960 Speaker 1: Um you know, there's to be various shifts in the 412 00:22:42,040 --> 00:22:45,080 Speaker 1: makeup of economic activity, so we have to be watching that. 413 00:22:45,160 --> 00:22:48,119 Speaker 1: But how quickly does behavior go back to something that 414 00:22:48,160 --> 00:22:50,760 Speaker 1: looks more close to normal, I think right now is 415 00:22:50,840 --> 00:22:52,919 Speaker 1: very uncertain and something we have to be evaluating in 416 00:22:52,960 --> 00:22:55,560 Speaker 1: real time. I was struck by a survey by open 417 00:22:55,560 --> 00:22:59,240 Speaker 1: Table showing that one in every four US restaurants will 418 00:22:59,280 --> 00:23:01,679 Speaker 1: go out of business is due to the pandemic. And 419 00:23:01,720 --> 00:23:04,360 Speaker 1: I'm just struck with what's going to take up all 420 00:23:04,359 --> 00:23:08,200 Speaker 1: the space that all of these restaurants and retail stores 421 00:23:08,560 --> 00:23:11,120 Speaker 1: currently do. Andrew, and I know you're saying cars could 422 00:23:11,160 --> 00:23:13,280 Speaker 1: be a bright spot. Is there anything else that's a 423 00:23:13,320 --> 00:23:19,119 Speaker 1: bright spot? Yeah, I think there is a large amount 424 00:23:19,160 --> 00:23:22,119 Speaker 1: of reallocation that's going to occur. So this is certainly 425 00:23:22,119 --> 00:23:24,280 Speaker 1: not good news for any of the you know, perhaps 426 00:23:24,320 --> 00:23:25,760 Speaker 1: it could be as much as a quarter like that 427 00:23:25,800 --> 00:23:28,360 Speaker 1: service suggested of restaurants that are going out of business, 428 00:23:28,560 --> 00:23:30,639 Speaker 1: But there is just a large shift that's going on 429 00:23:30,760 --> 00:23:32,880 Speaker 1: in that sector, you know, like we were talking about 430 00:23:32,920 --> 00:23:36,240 Speaker 1: in other sectors. So you know, you may have less 431 00:23:36,640 --> 00:23:41,840 Speaker 1: of the smaller restaurants UM and more restaurants that are 432 00:23:41,880 --> 00:23:44,200 Speaker 1: offering more to go service. You always see pizza go 433 00:23:44,320 --> 00:23:47,280 Speaker 1: every for instance, UM, which is which is increasing UM. 434 00:23:47,280 --> 00:23:49,800 Speaker 1: Now it's still a costly process for the economy to 435 00:23:49,840 --> 00:23:53,200 Speaker 1: go through that reallocation process. M. But you know, ultimately 436 00:23:53,240 --> 00:23:55,479 Speaker 1: those storefronts will be occupied again, it just might be 437 00:23:55,600 --> 00:23:59,480 Speaker 1: different businesses. Andrew, nobody's listening to the show this morning, 438 00:23:59,480 --> 00:24:01,879 Speaker 1: so I'm on, I'm not embarrassed to ask this question, 439 00:24:01,960 --> 00:24:05,639 Speaker 1: But how are you going to amend your gross US 440 00:24:05,800 --> 00:24:10,719 Speaker 1: forecasts off of this dramatically worse retail report? Does this 441 00:24:10,840 --> 00:24:14,800 Speaker 1: bring your your judgment in by tenths of a percentage 442 00:24:14,800 --> 00:24:18,160 Speaker 1: point or does it bring it in by full percentage points. 443 00:24:19,119 --> 00:24:23,280 Speaker 1: So we said back in March that forecast changes are 444 00:24:23,400 --> 00:24:26,440 Speaker 1: in general going to be in the percentage point week 445 00:24:26,520 --> 00:24:28,960 Speaker 1: to week. So I think that's really what people should 446 00:24:28,960 --> 00:24:31,720 Speaker 1: be thinking about. With these numbers, you're essentially getting, you know, 447 00:24:31,760 --> 00:24:34,600 Speaker 1: what would usually be, you know, month's worth, if not 448 00:24:34,680 --> 00:24:37,680 Speaker 1: a year's worth of economic data in terms of change 449 00:24:37,720 --> 00:24:40,000 Speaker 1: to the forecasts, and just one of these numbers, so 450 00:24:40,480 --> 00:24:43,720 Speaker 1: we can easily move our forecasts by percentage points with 451 00:24:43,800 --> 00:24:46,560 Speaker 1: any one number that's coming out for April. John, this 452 00:24:46,640 --> 00:24:51,680 Speaker 1: is just shocking. I can't convey how unimaginable that Control 453 00:24:51,720 --> 00:24:54,760 Speaker 1: Groups Statistic is. Just breaking down the numbers tell O 454 00:24:54,880 --> 00:24:59,240 Speaker 1: thirteen major categories decreasing let by seventy eight point eight 455 00:24:59,280 --> 00:25:03,280 Speaker 1: per central clothing store, sixty point six percent. Decline at 456 00:25:03,320 --> 00:25:07,600 Speaker 1: electronics and applying stores. Really not pretty. The only category 457 00:25:07,640 --> 00:25:10,160 Speaker 1: that recorded again, Tom, just to point out non store 458 00:25:10,200 --> 00:25:13,360 Speaker 1: sales of course, online Amazon et cetera increased eight point 459 00:25:13,400 --> 00:25:15,280 Speaker 1: four percent. I don't want to get in a shout 460 00:25:15,320 --> 00:25:19,560 Speaker 1: fest on politics, but I would defer everybody to Dr 461 00:25:19,600 --> 00:25:23,440 Speaker 1: Hooper in his esteemed experience or Katherine Manett City Group, 462 00:25:23,440 --> 00:25:27,840 Speaker 1: Hooper Deutsche Bank. John on three trillion dollars to them, 463 00:25:28,040 --> 00:25:35,119 Speaker 1: to those people in a lot of money. I mentioned 464 00:25:35,119 --> 00:25:37,760 Speaker 1: that Jennifer Rome of UCL in London today, the great 465 00:25:37,840 --> 00:25:42,760 Speaker 1: viroologists there, andrews Pecos Johns Hopkins University and of course 466 00:25:42,760 --> 00:25:45,440 Speaker 1: at the Bloomberg School of Public Health there. I should 467 00:25:45,480 --> 00:25:49,000 Speaker 1: mention Mr Bloomberg as a founder of Bloomberg Lpters Radio, 468 00:25:49,080 --> 00:25:52,240 Speaker 1: this television property as well and as a philanthropist to 469 00:25:52,440 --> 00:25:56,560 Speaker 1: his Johns Hopkins University. And I was talking to Dr 470 00:25:56,680 --> 00:26:00,119 Speaker 1: Rome about Andrew Pekosh and the idea of testing it 471 00:26:00,400 --> 00:26:04,520 Speaker 1: in the view forward of how we judge our virology 472 00:26:04,720 --> 00:26:08,440 Speaker 1: in America. Let's listen. A few things came up yesterday 473 00:26:08,440 --> 00:26:11,959 Speaker 1: in terms of the efficiency of testing and the accuracy 474 00:26:11,960 --> 00:26:15,000 Speaker 1: of testing. UM. I'll emphasize something that I've tried to 475 00:26:15,040 --> 00:26:18,639 Speaker 1: emphasize before. UM the test matters, but who gives the 476 00:26:18,680 --> 00:26:22,879 Speaker 1: test and who is also important. And one has to 477 00:26:22,960 --> 00:26:25,879 Speaker 1: understand that just because someone has a test for COVID 478 00:26:25,960 --> 00:26:28,840 Speaker 1: nineteen doesn't mean that it's an accurate. Testing doesn't mean 479 00:26:28,880 --> 00:26:32,760 Speaker 1: that it's being performed accurately. And I think you know, 480 00:26:32,800 --> 00:26:35,920 Speaker 1: we have to think about moving to a different way 481 00:26:35,960 --> 00:26:39,119 Speaker 1: of monitoring for disease UM as we're trying to open 482 00:26:39,200 --> 00:26:42,280 Speaker 1: up the economy. We're no longer going to be chasing cases. 483 00:26:42,320 --> 00:26:44,200 Speaker 1: We want to get ahead of the cases. We want 484 00:26:44,240 --> 00:26:47,800 Speaker 1: to find individuals who are ill and then start testing 485 00:26:47,800 --> 00:26:49,920 Speaker 1: the people who come in contact with so we can 486 00:26:50,000 --> 00:26:54,639 Speaker 1: identify them earlier, quarantine them, and limit the spread of 487 00:26:54,680 --> 00:26:58,120 Speaker 1: the virus in that way. How do we do that 488 00:26:58,400 --> 00:27:02,920 Speaker 1: in America? With our social history? The public health interventions 489 00:27:03,359 --> 00:27:06,840 Speaker 1: UM are difficult. It's very clear to me and my 490 00:27:06,920 --> 00:27:09,800 Speaker 1: family actually how difficult this has been. But these are 491 00:27:09,800 --> 00:27:14,560 Speaker 1: the necessities. UM. What other countries have have demonstrated is 492 00:27:14,640 --> 00:27:18,760 Speaker 1: if you loosen these public health parameters and you're not 493 00:27:18,880 --> 00:27:22,760 Speaker 1: ready to institute large amounts of testing in a very 494 00:27:22,800 --> 00:27:25,120 Speaker 1: different way than we're doing it now, then you'll see 495 00:27:25,160 --> 00:27:29,400 Speaker 1: these bounce backs. And we do risk the the the 496 00:27:29,400 --> 00:27:34,000 Speaker 1: the the the the chance to UM to recover quickly. Now, 497 00:27:34,160 --> 00:27:36,600 Speaker 1: if we fall back and go back into three or 498 00:27:36,640 --> 00:27:41,240 Speaker 1: four weeks of public health, of of stay at home UM, 499 00:27:41,320 --> 00:27:44,000 Speaker 1: that effect of the economy will be much greater than 500 00:27:44,040 --> 00:27:47,760 Speaker 1: trying to slowly come back into it. Right now, Dr Pecosh, 501 00:27:47,960 --> 00:27:50,240 Speaker 1: what do we know about antibody testing? I mean, I 502 00:27:50,240 --> 00:27:52,080 Speaker 1: know I keep on asking about it, but it seems 503 00:27:52,160 --> 00:27:55,600 Speaker 1: key to know how what percentage of the population have 504 00:27:55,720 --> 00:27:59,000 Speaker 1: had this and whether they're immune. When will we actually 505 00:27:59,000 --> 00:28:01,159 Speaker 1: have a clearer picture What are some of the testing 506 00:28:01,280 --> 00:28:04,440 Speaker 1: or schemes out there. Yeah, you're absolutely correct in terms 507 00:28:04,480 --> 00:28:07,119 Speaker 1: of asking this question, because it will be one of 508 00:28:07,160 --> 00:28:09,960 Speaker 1: the things that has the potential to really change the 509 00:28:10,000 --> 00:28:15,400 Speaker 1: way we approach this. Uh, the the the outbreak. UM. 510 00:28:15,440 --> 00:28:17,320 Speaker 1: There seems to be lots of data coming out from 511 00:28:17,320 --> 00:28:22,200 Speaker 1: many different places showing that most people who are infected 512 00:28:22,240 --> 00:28:26,560 Speaker 1: with the COVID nut with COVID nineteen do have antibody responses, 513 00:28:26,640 --> 00:28:30,959 Speaker 1: so their body responds UM. They have decent levels of 514 00:28:31,080 --> 00:28:34,440 Speaker 1: the antibodies that we think are the protective antibodies. So 515 00:28:34,440 --> 00:28:37,240 Speaker 1: so far things are looking good in terms of how 516 00:28:37,280 --> 00:28:40,640 Speaker 1: people are responding immunologically to the infection. UM. What we 517 00:28:40,680 --> 00:28:43,360 Speaker 1: really need to know now is how long these responses 518 00:28:43,840 --> 00:28:46,080 Speaker 1: are going to last. Are they going to fade in 519 00:28:46,120 --> 00:28:48,000 Speaker 1: a few months or are they going to stay for 520 00:28:48,400 --> 00:28:51,200 Speaker 1: a year or longer UM. And we also need to 521 00:28:51,240 --> 00:28:54,320 Speaker 1: monitor these people who are antibody positive to see if 522 00:28:54,360 --> 00:28:57,600 Speaker 1: they can become reinfected. That will be the proof that 523 00:28:57,680 --> 00:28:59,960 Speaker 1: says that some of these antibody tests are actually telling 524 00:29:00,080 --> 00:29:01,800 Speaker 1: us what we want them to tell us, which is 525 00:29:01,800 --> 00:29:05,080 Speaker 1: that if you're antibody positive, you won't be able to 526 00:29:05,120 --> 00:29:07,320 Speaker 1: be infected or at least very easily with the virus. 527 00:29:07,680 --> 00:29:10,120 Speaker 1: Do we have any idea of, you know, whether the 528 00:29:10,320 --> 00:29:14,040 Speaker 1: antibody test is positive, how long you're immune to this virus. 529 00:29:14,120 --> 00:29:16,400 Speaker 1: Is it something that we'll just have to live with. 530 00:29:16,640 --> 00:29:19,480 Speaker 1: Is this the kind of seasonal flu that you know 531 00:29:19,560 --> 00:29:21,960 Speaker 1: that we will see kind of you're you're in and 532 00:29:22,040 --> 00:29:27,160 Speaker 1: you're out in various mutations. Right now, the virus hasn't 533 00:29:27,360 --> 00:29:31,240 Speaker 1: seen a large amount of people who have immunity to 534 00:29:31,360 --> 00:29:33,840 Speaker 1: it UM, So what do I mean by that there's 535 00:29:33,880 --> 00:29:35,640 Speaker 1: so many of us that have no immunity to it 536 00:29:35,760 --> 00:29:38,480 Speaker 1: that the virus is easily finding those people and infecting 537 00:29:38,480 --> 00:29:41,840 Speaker 1: those people um Somewhere Over time, as more and more 538 00:29:41,880 --> 00:29:45,120 Speaker 1: people get infected, it's going to start seeing people that 539 00:29:45,280 --> 00:29:48,240 Speaker 1: have antibodies to the virus. And the big question then 540 00:29:48,360 --> 00:29:53,680 Speaker 1: is will this virus respond like influenza does, and mutations 541 00:29:53,680 --> 00:29:55,960 Speaker 1: will accumulate and the virus will find a way to 542 00:29:56,000 --> 00:29:58,680 Speaker 1: get around that immunity, or will it respond to the 543 00:29:58,720 --> 00:30:01,520 Speaker 1: ways that some of our other more classic viral infections 544 00:30:01,560 --> 00:30:05,400 Speaker 1: like measles does, and you will continue to be protected 545 00:30:05,400 --> 00:30:07,840 Speaker 1: from infection and the virus won't be able to infect you. 546 00:30:08,200 --> 00:30:10,080 Speaker 1: So that's the big question that we want to ask 547 00:30:10,320 --> 00:30:13,280 Speaker 1: about the about the virus, and again that's another question 548 00:30:13,320 --> 00:30:14,840 Speaker 1: that's gonna take some time for us to get an 549 00:30:14,840 --> 00:30:19,960 Speaker 1: answer to. Andrew Pecco. So the Johns Hopkins University just 550 00:30:20,000 --> 00:30:23,600 Speaker 1: a brilliant conversation there. Thanks for listening to the Bloomberg 551 00:30:23,600 --> 00:30:29,560 Speaker 1: Surveillance Podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 552 00:30:29,920 --> 00:30:34,160 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at 553 00:30:34,200 --> 00:30:38,480 Speaker 1: Tom Keane before the podcast. You can always catch us worldwide. 554 00:30:38,920 --> 00:30:40,000 Speaker 1: I'm Bloomberg Radio